In This Article:
Examining Dongguang Chemical Limited’s (SEHK:1702) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess 1702’s latest performance announced on 31 December 2017 and weight these figures against its longer term trend and industry movements. Check out our latest analysis for Dongguang Chemical
How 1702 fared against its long-term earnings performance and its industry
To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This method allows me to analyze various companies on a more comparable basis, using the latest information. For Dongguang Chemical, its latest earnings (trailing twelve month) is CN¥46.88M, which compared to the previous year’s figure, has escalated by more than double. Since these figures may be somewhat nearsighted, I have calculated an annualized five-year figure for Dongguang Chemical’s earnings, which stands at CN¥53.17M This means even though earnings growth from last year was positive, over time, Dongguang Chemical’s earnings have been waning on average.
What could be happening here? Let’s examine what’s occurring with margins and whether the entire industry is facing the same headwind. Revenue growth over the last couple of years, has been positive, however earnings growth has been falling. This suggest that Dongguang Chemical has been increasing expenses, which is harming margins and earnings, and is not a sustainable practice. Scanning growth from a sector-level, the HK chemicals industry has been growing, albeit, at a unexciting single-digit rate of 9.72% over the previous twelve months, . This is a turnaround from a volatile drop of -4.21% in the previous couple of years. This suggests that, in the recent industry expansion, Dongguang Chemical is able to leverage this to its advantage.
What does this mean?
Though Dongguang Chemical’s past data is helpful, it is only one aspect of my investment thesis. Recent positive growth isn’t always indicative of a continued optimistic outlook. There could be variables that are affecting the industry as a whole, hence the high industry growth rate over the same time period. You should continue to research Dongguang Chemical to get a better picture of the stock by looking at: